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FILE - In this June 13, 2013, file photo, Sen. Rand Paul, R-Ky., left, shakes hands with Ralph Reed, founder of the Faith and Freedom Coalition, after he addressed their "Road to Majority" conference in Washington. Organizers insist the Faith and Freedom Coalition's recent conference was not focused on politics. But last week's gathering of religious conservatives offers an example of the murky rules and lax enforcement surrounding the expanding network of nonprofit groups working to influence politics even as Congress probes the Internal Revenue Service's targeting of conservative groups (AP Photo/Charles Dharapak, File)

Conservatives conference highlights murky tax laws

WASHINGTON — It was called the “Road to Majority” conference, a not-so-subtle reference to winning control of Capitol Hill in the 2014 midterm elections. Some of the biggest names in the Republican Party — several potential presidential candidates among them — offered plans to strengthen the GOP. Breakout sessions included tips on “winning the hearts and minds of young people” and harnessing new technology to win elections.

The political overtones of last week’s Faith and Freedom Coalition conference were striking. But organizers insist the event was not focused on politics and say they’re not violating laws that prevent tax-exempt groups like theirs, classified as “social welfare” organizations under the tax code, from engaging in direct or indirect political campaigning.

As Congress probes the Internal Revenue Service’s targeting of conservative groups, last week’s conference at a downtown Washington hotel provided an example of the murky rules and lax enforcement surrounding the expanding network of big-budget nonprofit groups actively working to influence politics and policy.

Such organizations fueled an unprecedented expansion of spending in American politics last fall, using their tax status to hide donors’ identities and avoid donation limits while investing more than a quarter of a billion dollars in television advertising, mailings and ground support to help influence elections nationwide.

They’re gearing up to play even bigger roles in next year’s midterm elections, with huge implications for the balance of power in Congress and President Obama’s second-term agenda. Their chief overseer, the IRS, is distracted by a criminal investigation after acknowledging that some of its officials inappropriately scrutinized conservative organizations.

“It’s Christmas in June” for nonprofit groups looking to abuse the tax code for political gain, says Marcus Owens, a former director of the IRS’ tax-exempt unit. He says the tax enforcement agency is virtually paralyzed while the probe is going on. That leaves the most powerful groups, like the Faith and Freedom Coalition, with little guidance on how to balance political activity, and little disincentive to bend or break the rules.

Owens said the Faith and Freedom Coalition likely “has a tax problem,” but organizers “have nothing to fear from the IRS” because it’s bogged down by congressional and Justice Department investigations.

The Georgia-based Faith and Freedom Coalition, focused largely on promoting Christian values, is among a growing class of politically active groups — largely on the conservative side — operating in a campaign finance system given free rein by a 2010 Supreme Court ruling that opened the floodgates for political money.

But politically active nonprofits have been pushing the limits of tax laws for years.

Evangelical leader Ralph Reed founded the Faith and Freedom Coalition in 2009, building on experience as the director of another nonprofit group, the Christian Coalition. The IRS denied that organization’s tax-exempt status in 1998, concluding that some of its activities were too partisan. That ruling helped contribute to the once-powerful group’s fall from prominence.

Faith and Freedom Executive Director Gary Marx says his group did not have problems obtaining tax-exempt status in 2009, though some of its smaller state-based affiliates appear to have been caught in the IRS’ special focus on conservative groups.

That’s in line what organizations across the country call a pattern at the IRS: scrutiny for smaller conservative groups, often delaying their tax-exempt applications for more than a year, but a hands-off policy with the larger, most influential organizations.

The Faith and Freedom Coalition is among those large groups, with reported revenues of $5.5 million in 2010 and $3.4 million in 2011, the most recent tax filing publicly available. In that document, the organization describes its mission as being “committed to educating and informing people at the grassroots level about timely public policy issues and encourage them to participate in the legislative process.”

Reed, chairman of the Faith and Freedom Coalition, portrayed a sharply more political mission in the conference program.

“We are building a permanent pro-family, conservative majority, not just in both house(s) of Congress, but in every state house, school board, and city council across the country,” he wrote in a message to participants. “The ‘Road to Majority’ conference is an essential training and equipping weekend to help you stop the radical Obama agenda, advance conservative legislation, and prepare for the 2013-2014 elections.”

Asked about the conference’s apparent political focus, Marx said there was a “clear public policy” component to the conference, particularly its “lobby day,” in which participants traveled to Capitol Hill to discuss immigration, health care and even the regulation of nonprofits with elected officials.

Further, Marx said there was “a deep public policy focus” in the speeches from coalition leaders and invited guests.

Prominent speakers such as Florida Sen. Marco Rubio called on the Republican Party to embrace its opposition to abortion, insisting that “every human life has value ... whether they are born or not.” In addition to repeatedly criticizing Obama, former Alaska Gov. Sarah Palin rejected calls for an immigration overhaul that includes a path to citizenship for immigrants in the country illegally. And Republican National Committee Chairman Reince Priebus urged religious conservatives to support the GOP’s plans to expand the party’s appeal among minorities and younger voters.

Experts on tax-exempt organizations say the Faith and Freedom Coalition waded too deeply into politics for a group registered as a “social welfare” organization under section 501(c)(4) of the federal tax code. That section grants tax-exempt status as long as the primary mission of these organizations is not politics and influencing elections.

“They’re simply another example of the problem,” said Frances Hill, a University of Miami law professor who is an expert in this area and testified during congressional investigations. “For years, very openly, the IRS has done nothing about a whole range of organizations that don’t seem much different from this one — openly and flamboyantly political in an election campaign sense.”

And there is little sign that a divided Congress or an embattled IRS will step up enforcement efforts or clarify guidelines while facing intense public scrutiny. Still, Marx suggested that groups like his need more clarity.

“We want there to be a bright line so there is not this murky gray area,” he said.